Acceptance of payment through prescribed electronic modes section 269SU- Can you accept payment thru account payee cheque

[Sushil Singh]

Note on Acceptance of payment from customers thru Account Payee Cheque after introduction of Section 269SU & Rule 119AA

Facts of the Matter:

With the amendment in the Finance Act section 269SU was introduced effective 01.11.2019 which reads as follows:

Acceptance of payment through prescribed electronic modes.

The said section was Inserted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-11-2019

After section 269ST of the Income-tax Act, the following section shall be inserted with effect from the 1st day of November, 2019, namely:-

Acceptance of payment through prescribed electronic modes.

“269SU. Every person, carrying on business, shall provide facility for accepting payment through prescribed electronic modes, in addition to the facility for other electronic modes, of payment, if any, being provided by such person, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year.”

It is important to note that Section 269ST which prescribes mode of undertaking transactions reads as follows:

Mode of undertaking transactions.

269ST. No person shall receive an amount of two lakh rupees or more-

 (a) in aggregate from a person in a day; or

 (b) in respect of a single transaction; or

 (c) in respect of transactions relating to one event or occasion from a person,

otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account ⁶⁹[or through such other electronic mode as may be prescribed]:

…..

The amendment has been made effective by notification 105/2019 dated 30.12.2019 from 01.01.2020. The text of notification is as follows:

G.S.R. 960(E).-In exercise of the powers conferred by section 269SU read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend Income-tax Rules, 1962, namely:-

1. Short title and commencement.-

(1) These rules may be called the Income-tax (16th Amendment) Rules, 2019.

(2) They shall come into force from 1st day of January, 2020.

2. In the Income-tax Rules, 1962, after rule 119A, the following rule shall be inserted, namely:-

“119AA. Modes of payment for the purpose of section 269SU.- Every person, carrying on business, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year shall provide facility for accepting payment through following electronic modes, in addition to the facility for other electronic modes of payment, if any, being provided by such person, namely:-

(i) Debit Card powered by RuPay;

(ii) Unified Payments Interface (UPI) (BHIM-UPI); and

(iii) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).”.

QUESTION :

The doubts has been raised whether class of persons prescribed under the said rules can accept payments from customer thru cheque after the insertion of the section 269SU and rule 119AA ?

Discussion & Conclusion:

Please note that the insertion of section has been made in chapter XX-B which reads as “ Requirement as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax”. It is very important to note that the said section 269SU has been inserted after Section 269ST- Mode of undertaking transactions which permits amount for more than 2 lacs can be received thru account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account ⁶⁹[or through such other electronic mode as may be prescribed]. This clearly mean that facility of electronic payments thru use of Rupay Debit Card, UPI,UPI-QR as prescribed in rule 119AA read with section 269SU is in addition to the already existing mode of undertaking transactions and in no way restricts acceptance of payment from customers or any other person thru account payee cheque.

It must also be noted that the section 269SU mandates the availability of the facility for the customers and don’t mandates the said acceptance by the seller. The customer can opt to pay or not to pay through prescribed mode. If customer  opts, the seller is duty bound to accept it in electronic mode as prescribed in 269SU read with rule 119AA.

Therefore it can safely be concluded that there is no restriction on acceptance of payment thru account payee cheque or account payee bank drafts after introduction of section 269SU read with rule 119AA

(Sushil Singh)

Chartered Accountant

Note: The fine of ₹ 5000 per day will be effective from 1st February 2020 and would be initiated through the rules as informed in Section 271DB. Therefore the companies has time to put the facility prescribed under rule 119AA by 31^st January 2020.

Disclaimer:

Any tax advice in this communication is not intended or written by us to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed by any governmental taxing authority or agency. The user may consult their tax advisors before taking any action in this regard

Discussions to this article

[CA.LALIT MUNOYAT]

With due respect to the author I wish to submit my point of view.

Before insertion of new section 269SU there were only 2 sections which provided for payment of expenditure incurred.

1. 40A(3) Payment in excess of ₹ 10000/- has to be made only by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed. This section applied to only those assessees who INCURRED expenditure of revenue nature

2. Later Section 269ST was inserted w.e.f. 1^st April 2017 to provide one more restriction. This restriction applied to the Assessees who ACCEPT such payment. This section applied to both types of transactions i.e. revenue expenditure and capital expenditure.

‘269ST. No person shall receive an amount of two lakh rupees or more-

(a) in aggregate from a person in a day; or

(b) in respect of a single transaction; or

(c) in respect of transactions relating to one event or occasion from a person,

otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed.

3. Now w.e.f 01-01-2020 section 269SU was introduced which provides that Every person, carrying on business, shall provide facility for accepting payment through prescribed electronic modes, in addition to the facility for other electronic modes, of payment, if any, being provided by such person, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year. This section applies to an assessee who ACCEPTs such payment when his turnover in business exceeds fifty crore rupees during the immediately preceding previous year.

4. According to this section a business man have provided any mode of electronic payment like

1. Banking cards

2. USSD

3. Aadhaar Enabled Payment System (AEPS)

4. UPI

5. Mobile Wallets

6. Bank pre-paid cards

7. Point of Sale (PoS)

8. Internet Banking

9. Mobile Banking

10.Bharat Interface for Money (BHIM) app (or may be many more)

These all or any mode of payment may have been provided by the business man called existing payment facilities. However by this new section 269SU every business with Turnover exceeding ₹ 50 Cr shall have to provide additional facilities of modes of payment by electronic means.

The following modes of electronic payment have now been prescribed

(i) Debit Card powered by RuPay;

(ii) Unified Payments Interface (UPI) (BHIM-UPI); and

(iii) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).”.

This is understandable because these additional mode of electronic payment are the innovation of very recent time and may be called indigenously developed modes of electronic payment.

Therefore we can’t read section 269SU in conjunction with section 269ST because both operates under different domain. Section 269ST talks of all modes of payment including cheque but section 269SU talking only for mode of electronic payment.

In conclusion it may now safely be said that all the payment made to an assessee whose turnover exceeds ₹ 50 Cr shall not by any paper form of currencies including Cheque and Bank Drafts but only by mode of electronic mode.

[A Wilson]

Our View as below:

• 269SU States that "Shall Provide Facility of Electronic Modes of Payment" but not Stating as "Shall Accept/Receive Electronic Modes of Payment"

Hence, such entity/person must provide the facility of listed Electronic Modes of Payment but not required to accept/receive the payments only through such Modes

[CA.LALIT MUNOYAT]

There are various provisions in the Act which prohibit cash transactions and allow/encourage payment or receipt only through account payee cheque, account payee draft or electronic clearing system through a bank account.

In order to encourage other electronic modes of payment, it was proposed to amend sections 13A, 35D, 40A(3), 43(1), 43CA, 44AD, 80JJA, 269SS, 269ST so as to include such other electronic mode as may be prescribed, in addition to the already existing permissible modes of payment in the form of an account payee cheque or an account payee bank draft or the electronic clearing system through a bank account.

For example section 43A(3) provides that where an assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, exceeds ten thousand rupees, no deduction shall be allowed in respect of such expenditure.

If we check other sections quoted above, it will be found that each section contain the words “by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed”

However the new section does not refer to payment by account payee cheque. It prescribes only electronic modes of payment. Had it been the intension of the Parliament to provide for payment by Cheques etc. it would have stated it in section itself in the same way as it has prescribed for other sections. But it is not so.

“269SU. Every person, carrying on business, shall provide facility for accepting payment through prescribed electronic modes, in addition to the facility for other electronic modes, of payment, if any, being provided by such person, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year.

If payment by cheque, drafts etc. were to be permitted than there was no need for this section. Section 269ST is already there to take of such transactions. It strengthen my views that payment by cheque, drafts are not permitted u/s 269SU.

However the section is silent on the amount of penalty to be imposed on the seller if he, after providing the said facilities, does not accept the payment. Penalty of ₹ 5000/- per day is only for not providing additional modes of payment.